Demographic dividend gets postponed as agriculture workforce falls

India's demographic dividend stands postponed, if we go by the employment figures garnered by the latest, 68th Round survey of the National Sample Survey Organisation.

The proportion of the workforce living off agriculture has fallen below half, for the first time, which marks a milestone in the economy's structural diversification and moving people out of low-value agriculture and under-employment. A third major finding is that women are withdrawing from the workforce.

This is an extremely regressive tendency, unless they are withdrawing to spend more time in education, which has to be established independently. The demographic dividend is a shortcut for the phenomenon in which the working age population as a proportion of the population goes up, delivering faster growth through two routes: one, with more people working, even without any increase in productivity per worker, total output goes up; and two, with the share of nonworking, dependent population coming down, the economy has more savings at its disposal to invest.

If the proportion of the population entering the labour force comes down, these benefits would not accrue. And precisely that has been happening, with the ratio coming down from 43% in 2004-05 to 40% in 2009-10 to 39.5% in 2011-12.

While this ratio has been more or less steady for men at over 55.5%, it has fallen, in the case of women, from 29.4% to 22.5%. It could be that more people are postponing their work life to stay back longer in education.

While this would postpone the demographic dividend, a more skilled workforce would increase productivity and boost growth further. Reforms to encourage and facilitate women workers are called for, in any case. Right now, a lower labour force participation rate helps keep the unemployment rate down, 2.3%, 2% and 2.2% in the three reference years.

Even in 2009-10, 63% of workers toiled in agriculture. This has fallen to 49% by 2011-12. Of course, this is still way too high. But progress is being achieved. If investment and growth pick up, the change would be dramatic.